Should You Get a Store-Brand Debit Card?

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Posted on 08/21/2014

Exclusive discounts, extra savings and cardholder-only events are just some of the perks that can accompany having a store credit card. And the incentives must be appealing because according to Equifax around 175 million of these accounts exist. But what if you don't like the idea of racking up extra debt just to enjoy those benefits? A growing number of retailers are offering store-branded debit cards where the cash to cover purchases comes right out of your bank account. But should you put one in your wallet?

Cash Rewards
Some store-branded debit cards offer cash rewards. For instance, those with the Nordstrom debit card accrue points. Once you reach 2,000 points you'll receive a $20 Nordstrom Note. You can use those Notes to buy anything you want at Nordstrom, Nordstrom Rack or online at Nordstrom.com. Plus, if you spend $100 at Nordstrom the day you apply for your debit card you'll get a $20 bonus.


You Might Spend More
Research shows that people who have store-branded credit cards end up spending more money than they would if they were paying cash. Why? Because they know they're saving a percentage off their purchase price. The same could hold true with the debit card. If you know you're saving more, you may be inclined to spend more.


Donations
One of the cool perks with the Target debit REDcard is that you can designate an elementary or middle school to receive a donation in your name. That school will receive 1% of your REDcard purchases made at Target or Target.com.


Overdraft Fees
Just beware of the potential of overdraft fees when using a store-branded debit card. DailyFinance.com interviewed a woman who received a $30 insufficient funds fee when Target let a transaction go through even though her checking account didn't have the cash to cover it. The woman thought if she didn't have the money in her account, she wouldn't be allowed to make the purchase with her Target debit card.


Getting Cash Back
When you use a store-branded debit card you can also receive cash back at the point of sale. This will save you a trip to the ATM and could also help you avoid bank fees that ATMs sometimes charge.


By Alison Storm


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